Marker Therapeutics, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual filing, not a standalone fourth-quarter report. Marker is a clinical-stage immuno-oncology company developing non-engineered, multi-antigen T-cell therapies, peptide vaccines and preclinical PolyStart technology. The October 2018 merger with Marker Cell Therapy materially changed the company and its reported results.
Financial overview
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $206,000, all grant income | $183,000, all grant income |
| Research and development expense | $7.95 million | $5.25 million |
| Acquired intellectual property expense | $116.04 million | — |
| General and administrative expense | $24.38 million | $6.41 million |
| Net loss | $147.96 million | $10.98 million |
| Net loss per share, basic and diluted | $7.75 | $1.16 |
| Cash used in operating activities | $14.48 million | $8.44 million |
| Cash and cash equivalents at year-end | $61.75 million | $5.13 million |
| Working capital at year-end | $59.19 million | $3.66 million |
| Total liabilities at year-end | $2.80 million | $1.52 million |
The company had no product-sales or licensing revenue. Gross margin is not meaningful for this revenue profile. Management reported no material debt balance; year-end liabilities were principally payables and accrued expenses, plus a $49,000 warrant liability.
Changes and significant transactions
- Net loss increased substantially, primarily because the merger was accounted for as an asset acquisition and the $116.0 million value of acquired, unapproved intellectual property was expensed immediately. This is a significant noncash item, not a recurring operating cash outflow of the same amount.
- R&D expense increased 51%, reflecting planned clinical-trial and development activity. G&A rose 280%; the company cited $12.5 million of stock-based compensation and $4.0 million of merger-related legal, accounting and professional costs, including a $0.2 million shareholder-litigation settlement.
- In October, Marker raised $70 million gross in a private placement, issuing 17.5 million shares and five-year warrants for 13.44 million shares at $5.00 per share. Net proceeds from the financing were reported as $63.8 million. The company also completed a $3.12 million gross stock sale and received approximately $2.0 million from repriced warrant exercises in May.
- At December 31, 2018, 23.0 million warrants were outstanding, with a weighted-average exercise price of $4.78; approximately 4.1 million options were also outstanding. These securities create potential dilution. Shares outstanding were 45.44 million at year-end and 45.47 million as of February 28, 2019.
Business, outlook and risks
Marker reported early clinical results from Baylor College of Medicine studies of MultiTAA T cells. In the lymphoma active-disease group, six of 15 patients had complete responses; in the lymphoma remission group, 15 of 17 were in continuing complete response at the reported cutoff. The filing also describes responses in small AML/MDS and multiple-myeloma cohorts. These are early, limited studies, and the company cautions that results may not predict outcomes in larger controlled trials. The company reported no cytokine-release syndrome to date and one possibly related grade III adverse reaction among 78 treated patients.
- Management planned to finalize its first company-sponsored clinical-trial protocol by the end of Q2 2019 and initiate a Phase II trial in post-transplant AML in the second half of 2019. BCM was expected to manufacture initial clinical-trial supply; Marker planned technology transfer and additional GMP capacity for later-stage needs.
- Management estimated that year-end cash, cash equivalents and investment securities would fund operations and capital needs through at least Q2 2020, based on assumptions that could prove incorrect. Further financing may be needed; the company has a history of losses, an accumulated deficit of $306.1 million and no product revenue.
- TPIV200’s Phase II ovarian-cancer trial completed enrollment of 120 patients in December 2018, with an interim efficacy analysis planned for 2019 after 50 progressions. A separate company-sponsored TNBC Phase II trial had completed enrollment. The filing reports ongoing or planned Phase II work for HER2/neu vaccines, including trials supported by DoD grants.
- Principal risks include clinical and regulatory failure or delay; dependence on BCM for research and cell manufacturing; the need to transfer and scale manufacturing; single-source suppliers, including Wilson Wolf; reliance on licensed intellectual property from BCM and Mayo Foundation; competition; and the need for additional capital. The BCM license includes royalties, milestones of up to $64.85 million and a 0.5% liquidity-event payment, subject to agreement terms.
- Management was evaluating peptide-vaccine programs and could de-emphasize or terminate programs. The company reported no material pending legal proceedings. The auditor gave an unqualified opinion on the financial statements, and management and the auditor reported effective internal control over financial reporting as of year-end.
Investor verification points
- Confirm cash burn, investment balances and the assumptions supporting management’s stated runway through Q2 2020.
- Track the AML Phase II protocol, trial start, enrollment, endpoints and any updates to the expected timeline.
- Review the full clinical datasets and follow-up, especially cohort sizes, response durability, safety and whether later trials reproduce early results.
- Assess manufacturing-transfer progress, GMP capacity, costs, product comparability and dependence on BCM and key suppliers.
- Quantify potential dilution from outstanding warrants, options and future financing, and review the economic terms and milestone obligations under the BCM and Mayo licenses.